Factors Affecting Commercial Bank Liquidity in Ethiopia: An Empirical Study of Selected Commercial Banks

Abstract The purpose of this study is to find out the factors affecting the liquidity of Ethiopian commercial banks. Eleven commercial banks operating in the country were involved in the analysis. In this study, the analysis was conducted using panel data for the years 2014/15–2023/24. Data utilized in this research are secondary in form. The data were collected from the annual financial statements of the selected banks, namely the National Bank of Ethiopia and macroeconomic analysis. Bank liquidity was measured using liquidity assets to deposits ratio. The variables used in the model include capital adequacy, profitability, bank size, loan growth, interest rate margin, deposit mobilization, NBE bills holding, inflation, money supply, and GDP growth. The estimation method employed is the random effects generalized least squares regression model. It was found out that capital adequacy and deposit mobilization affect bank liquidity positively and significantly, whereas loan growth, money supply and GDP growth affect bank liquidity negatively and significantly.